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Bankrupt co-op members seek to oust trustee

Published on NewsOK
Modified: November 12, 2013 at 4:52 pm •
Published: November 12, 2013

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BILLINGS, Mont. (AP) — Members of a bankrupt Montana power cooperative were due to appear before a federal judge Wednesday to push for the ouster of a court-appointed trustee who wants to keep the co-op together.

The members contend that trustee Lee Freeman is no longer needed after they decided among themselves to bust up the troubled co-op.

Attorneys for the members said in court filings that Freeman would drive up electricity rates with his reorganization plan for Southern Montana Electric Generation and Transmission Cooperative. Keeping the co-op together would hurt Montana consumers while benefiting the creditors who bankrolled the co-op's seldom-used, $85 million power plant near Great Falls, the attorneys said.

The members instead want to liquidate Southern Montana's assets, including the Highwood power plant. That would let them shop around for a cheaper electricity supplier, although that could come at the expense of Southern Montana's creditors.

Attorneys for Freeman and Prudential Insurance, which holds the note on the loan used to build Highwood, say the members are ignoring their obligations to Southern Montana's creditors. They accused the members of trying to get off the hook for power supply contracts by pursuing a "scorched earth" policy of liquidation.

The two sides are scheduled to make their case Wednesday before U.S. Bankruptcy Judge Ralph Kirscher in Billings. The matter was originally set for Tuesday but was postponed after a hearing in an unrelated case ran late.

The financial problems that led to Southern Montana's 2011 bankruptcy were highlighted by a failed attempt to build a 250-megawatt coal-fired power plant. The project ultimately was scaled back to a 40-megawatt gas plant, but even at its reduced capacity there has been insufficient power demand to offset its price tag.